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ABM Industries (ABM) Down 3% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for ABM Industries (ABM - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ABM Industries due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

ABM Industries Q3 Earnings Beat Estimates

ABM Industries reported mixed third-quarter fiscal 2020 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Adjusted earnings from continuing operations came in at 75 cents per share, which outpaced the consensus mark by 87.5% and the year-ago quarter’s reported figure by 25%. The bottom line benefited from higher margin improvement in Work Orders and persistent management of direct labor to align with the operating environment. Additionally, during the reported quarter, the company enacted various temporary cost-cutting measures such as salary reductions and furlough actions (concluded on Aug 1, 2020), which offset other expenses such as investments in the company’s new EnhancedClean program.

Total revenues of $1.39 billion missed the consensus estimate by 2.6% and declined 15.4% from the year-ago quarter. The year-over-year decline was due to coronavirus-related client disruptions, such as facility closures and service-scope changes within the majority of its business segments. These were, however, partially offset by huge demand for COVID-19-related work orders in the Business & Industry and Technology & Manufacturing segments.

Revenues by Segment

Business & Industry revenues (54% of total revenues) decreased 6.3% year over year to $756.9 million. Aviation revenues (8%) decreased 55.8% year over year to $116.4 million. Education revenues (14%) of $188.6 million decreased 12.5% from the prior-year quarter. Technical Solutions revenues (9%) decreased 28.1% year over year to $119.2 million.  

Technology & Manufacturing revenues (17%) improved 7.2% year over year to $243.2 million.

Operating Results

Adjusted EBITDA came in at $109.7 million compared with $93 million in the prior-year quarter. Also, adjusted EBITDA margin rose to 7.9% from 5.6% in the year-ago quarter.

Adjusted income from continuing operations was $50.1 million, up 24.6% year over year. Operating expenses decreased 19.2% from the year-ago quarter to $1.17 billion. Selling, general and administrative expenses decreased 5% from the year-ago quarter to $113.7 million.

Balance Sheet & Cash Flow

ABM Industries exited third-quarter fiscal 2020 with cash and cash equivalents of $229.4 million compared with $555.9 million at the end of the prior quarter. Long-term debt was $664.2 million compared with $1.11 billion at the end of the prior quarter.

Net cash generated from operating activities totaled $130.9 million in the reported quarter. Free-cash flow came in at $121.1 million.

Dividend Payout

ABM Industries paid out a quarterly cash dividend of 18.5 cents per share, leading to $12.3 million of total dividend payout in the reported quarter. Additionally, the company’s board of directors announced a cash dividend of 18.5 cents per share, to be paid out on Nov 2, 2020, to its shareholders of record as of Oct 1. This marked the 218th consecutive quarterly cash dividend declared by the company.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 41.18% due to these changes.

VGM Scores

At this time, ABM Industries has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, ABM Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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